Danish wind energy developer Ørsted announced late last week that it was entering into a partnership with New England’s largest energy company, Eversource, to develop key offshore wind assets in the Northeast of the United States, including two named offshore wind farms and two undeveloped New England lease areas.
The new partnership will see Ørsted divest 50% of its ownership in certain assets it acquired in its October 2018 acquisition of Rhode Island-based offshore wind developer Deepwater Wind. Eversource, which will acquire 50% ownership for a price of approximately $225 million, will enter into a 50-50 partnership with Ørsted in the development of the 704 megawatt (MW) Revolution Wind offshore wind project — which is set to deliver 400 MW to Rhode Island and 304 MW to Connecticut — and the development of the 130 MW South Fork offshore wind farm which will deliver power to Long Island. Both projects are subject to permitting and final investment decisions but, if approved, they could enter operation by 2023 and 2022 respectively.
Ørsted and Eversource will also partner on two undeveloped New England lease areas — Massachusetts North and Massachusetts South — which have the potential to be developed to well above the 1 gigawatt (GW) mark. These undeveloped lease areas exist in addition to the 5 GW or more that is under various stages of development across the US Eastern Seaboard in states such as Massachusetts, Rhode Island, and New Jersey.
“More than ever, the US offshore wind market has great growth potential with several states committing to significant buildout volumes,” said Martin Neubert, Executive Vice President and CEO of Offshore at Ørsted. “I’m delighted to extend our strategic partnership with Eversource in the North-East and welcome them to our new offshore wind projects which will enable the joint venture to harvest synergies across the different New England projects. Combined, Ørsted’s world-leading track-record in offshore wind and Eversource’s strong regional footprint offers a powerful setup for developing offshore wind projects in New England.”
“Ørsted continuously proves itself as a leader in the industry it helped to create, and this is recognized in the United States with their Revolution Wind and South Fork Projects,” added Lee Olivier, Eversource Executive Vice President for Enterprise Energy Strategy and Business Development. “We are excited to grow our partnership with Ørsted, and we look forward to working with the local communities where these projects exist, where we will honor all existing commitments and work collaboratively to deliver a clean energy transformation to homes and businesses throughout the region.”
The timing of the decision is interesting, though it is important to note that financial transactions such as these are not overnight affairs. Specifically, Ørsted came under fire in late January from New York Assemblyman Fred W. Thiele who accused the company (in partnership with Deepwater Wind) of “bait and switch” and “unethical tactics,” withdrawing his support for the South Fork project. Specifically, according to Assemblyman Thiele, “two important changes have occurred” with regards the project in question: “First, I have read that Deepwater Wind has been bought by Danish energy giant Orsted. Second, shortly after acquisition by Orsted, I have read that the project would utilize larger turbines and that the size of the project would increase from 90 megawatts to 130 megawatts, or a 44% increase.”
The reality of his accusations are minimal at best — these sort of transactions and acquisitions are par for the course, and represent not so much a loss of control, but rather the support of a larger and better-financed parent company to oversee and shepherd the development of the project. However, according to Assemblyman Thiele, Deepwater Wind had ignored his attempts to meet to discuss his concerns which, in this regard at least, was a failure on Deepwater Wind’s part. Nevertheless, it is interesting that Ørsted apparently read the tea leaves well enough to pre-empt the Assemblyman’s concerns and tie US ownership back into the development of these projects.
Further, according to Assemblyman Thiele’s office, who spoke to me via email, Ørsted US Offshore Wind’s CEO Thomas Brostrøm and Co-CEO Jeff Grybowski issued an apology to Thiele for communication that “has not been up to the standards we expect from our team.”